Cullen Roche | Apr 16, 2015 03:13AM ET
If you study economics and finance you’ll find a consistent battle between certain camps – the hard money camp and the fiat money camp. The hard money camp is characterized by people who think that the economic system should be based on “real” assets and that the monetary system should be linked to a physical form of money like gold. Similarly, they tend to veer towards a portfolio allocation that is based on “real” assets like commodities and hedges against exposure to “fiat” assets. The fiat money camp is characterized by people who view money as a simple medium of exchange and a technological advancement allowing for an elastic money supply that can better suit the needs of an increasingly complex financial world.
One of the biggest differences here is the view of money as a form of human innovation. The hard money types want us to revert back to a system that they claim worked better in the past. The fiat money types tend to understand that money has evolved because the old system was an antiquated technology. And those who understand that money is endogenous understand that it is truly the private sector (and not the government) that makes the most important innovations regarding “money”. Luckily, several factors show that the hard money types are losing the war on the future of money:
The obsession with hard money is an antiquated view. We would all be better off accepting the technological advancements that we’re seeing across the economic system. And that includes the forms of money we use. Unfortunately, much of this debate seems to be bogged down in politics and the view that the government “prints money” or can “debase the currency” (which are largely misguided views for reasons I’ve explained before – see here ). Luckily, knowledge and human innovation appear to be winning out over ideology. Let’s hope the trend continues.
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